Mega projects have a significant impact and importance on Mongolia’s economy, and the challenges they present are similar to those faced worldwide.
Since Mongolia’s transition to democracy in 1990, the Oyu Tolgoi project has been the country’s most successful mega-project. The investment agreement was signed in 2009, and the first commercial production began in 2012. However, escalating project costs and delays sparked political oppositions, as well as conflicts and periodic negotiations between key stakeholders – the Mongolian government and Rio Tinto. Despite these challenges, the underground mine of Oyu Tolgoi project, which holds 80% of the total reserves, was successfully completed and started commercial production in 2023. The Oyu Tolgoi project aims to reach a copper production target of 500,000 tonnes per year from its underground and open-pit mines between 2028 and 2036, making it the 4th largest copper producer in the world. Although the Oyu Tolgoi project has had a significant impact on Mongolia’s economy, it has occasionally faced criticism from populist politicians and local people due to nationalism and a protectionist approach to natural resources.
The $1.2 billion Oil Refinery Project, funded by a soft loan from the Export and Import Bank of India, was approved in 2018. Unlike Oyu Tolgoi, which is managed by Rio Tinto, the Oil Refinery is a government-led project. Planned in four phases of construction, the project faced delays and increased costs due to the Covid pandemic. Originally set for completion in 2024, the first phase remains unfinished, the loan repayment period began and financing for the remaining phases has stalled. The project now requires additional funding and is expected to be completed by 2027. As a result, strong debates have been ongoing in Parliament, criticizing the project’s inefficiency. Once operational, it will process 1.5 million tonnes of oil, meeting 55% of Mongolia’s domestic needs.
One of the mega-projects that the Mongolian government has struggled to launch successfully over many years is the Tavantolgoi project. Since 2008, there has been interest in developing a project based on the west side of world-leading coking coal reserves at Tavantolgoi, comparable in size to Oyu Tolgoi. Efforts to attract foreign investment and develop heavy industry and infrastructure in Tavantolgoi were made in 2011, 2014, and 2020.
In 2011, the Mongolian government launched an international tender during the commodity super cycle, attracting interest from major global companies, including Brazil’s Vale and Japan’s Mitsui. However, no agreements were reached. In 2014, a proposal for a coal processing plant, power station, and railway garnered interest from China’s Shenhua, Japan’s Sumitomo, and the US’s Peabody, but Parliament rejected it. Former Prime Minister Enkhsaikhan Mendsaikhan, who led the project, was imprisoned for over a year, claiming Russia influenced the disturbance. He blamed that Russia interfered with the project to safeguard the market for its coal companies in China. In 2020, preparations for an IPO were made, but the initiative was canceled before the elections.
Due to a potential shortage of energy sources, Mongolia has continuously attempted to implement large-scale energy projects. The Erdeneburen hydropower plant, planned for the Khovd River in western Mongolia, has a designed capacity of 90 megawatts and can generate 366 million kWh annually, supplying power to five provinces. However, the China-financed project has faced opposition due to environmental concerns and potential disruptions to local communities.
A similar case is the Egiin Gol Power Plant, which began in 1991 with funding from China’s government but faced environmental opposition from Russia. After 16 years of negotiations, the project experienced significant delays.
Looking beyond its two powerful neighbors, Mongolia pursues strong bilateral relations with international partners through its “Third Neighbor” policy. However, their influence persists: especially Russia focuses on railways, energy, and uranium while China dominates Mongolia’s foreign trade.
The average implementation period of a mega project is 6-8 years, covering strategic planning, construction, and operational phases. However, this timeline does not align with Mongolia’s political cycle, where Parliament serves four-year terms, and the Cabinet has a de facto cycle of 1.8 years. This discrepancy can lead to significant challenges in policy continuity and decision-making delays. For example, key decisions related to the Investment Agreement and Additional Funding Approval for the Oyu Tolgoi project were made by three different Prime Minister cabinets from two different political parties. But it was a successful case, while many other projects experienced delays.
Mongolia’s stunning landscapes are highly valued by its people, with over 200,000 households relying on agriculture, especially animal husbandry. Protection of the land is a key concern, and even urban people visit the countryside, fostering a strong desire to preserve the environment. As awareness of the negative impacts of large mining and energy projects grows, this has become a frequent topic of discussion among locals, leading to potential public backlash. To gain support, populist politicians often criticize megaprojects, especially in the natural resources and energy sectors, presenting a significant challenge for companies involved in.
Despite that, Mongolian government’s 2020-2024 action program set out an ambitious plan to implement 14 mega projects. One of them is the Zuuvch-Ovoo uranium project.
In January 2025, Orano Mining, a French company, and the Government of Mongolia signed an Investment Agreement to develop and operate the Zuuvch Ovoo uranium project, situated in Mongolia’s southeastern Dornogovi province.
With a 30-year estimated lifespan, the Zuuvch Ovoo project represents an initial investment of around $500 million before the deposit comes on stream, and a total of $1.6 billion over the mine’s lifetime, creating 1,600 direct and indirect jobs. Development of the project is planned to take 4 years, after which the Zuuvch-Ovoo mine will go into production, with an estimated nominal capacity of around 2,500 tonnes of uranium per year.